The author of this article has been working the Debt Consolidation sector since 2003. Back then, to most people, debt consolidation meant a loan.
Unsecured debt consolidation loans up to about £15,000 were easy to come by for it seems everyone except those with a very bad credit record.
For those with a mortgage on a home and say, unsecured debt of about £20,000, it was very easy to whack the unsecured debt onto the mortgage and start over again.
Brushing debt under the rug was almost too easy to be true. House prices were rising faster than people could accrue unsecured debt. Creditors were happy to lend on the back of this, Happy days. Happy days indeed. The daytime TV slots were full of such ads.
That was until the housing market crashed and lenders stopped lending.
Those who put unsecured debts onto their mortgage suddenly found their equity was falling not rising. No longer were people able to remortgage to consolidate debt.
The only silver lining (if you could call it that) is the Bank of England base rate being cut to, and maintained at, historically low levels of 0.5%. All those now in the ridiculous situation of having larger mortgages than when they bought their home benefited from lower repayments then they may have otherwise. So at least with has kept mortgage repayments for many at affordable levels and prevented many a home repossession.
Remortgaging and releasing equity is no longer a solution for those owning the majority of their home.
Currently their are about 750,000 people within a debt management plan with a commercial debt management provider.
From Jan to October 2011; According to the Insolvency Service, almost 40,000 people entered into an IVA as a method to consolidate debts into lower payments.
The lesson to be learned from this is that debt consolidation should only be considered as a route to lower interest charges so that more debt can be paid back quicker.
It should not be a seen as a way reduce outgoings so that more debt can be afforded as this cycle tends to to be repeated until you’re in a debt crisis and potenrially facing Bankruptcy